By Mike Sunnucks Senior Reporter, Phoenix Business Journal. See the original article here.
Jasmine Holmes and Mark Gustin have some typical narratives on Gilbert’s evolution into its current status as a local restaurant hub with appealing workforce demographics.
“It was a pass-through town,” said Gustin, a managing director with commercial real estate firm JLL, who has done deals in the East Valley for years.
Holmes — who owns 910 West, a high-tech marketing firm in Gilbert — said she remembers traveling to the East Valley for soccer tournaments growing up.
“There was nothing past Country Club Drive,” said Holmes, who also lives in Gilbert.
When Holmes and her husband moved to Gilbert, she said, “Liberty Market was a convenience store. It was dark.”
Liberty Market now is one of a slew of popular, hometown restaurants dotting Gilbert’s landscape. Those eateries include Postino’s, Zinburger, Barrio Queen and the Farmhouse, with new locations coming from Sam Fox’s Culinary Dropout and O.H.S.O. Brewery.
Restaurants took Gilbert’s image from vanilla suburbia to having a millennial- appealing foodie niche that could draw employers that otherwise might prefer a more urban market.
Gilbert Mayor Jenn Daniels said her town has created a sense of place while trying to keep its small-town vibe within the sprawling Phoenix market.
“We don’t want to price out the ‘mom and pops,’” said Daniels, referring to the town’s small-business base and independent restaurants. “That’s our niche.”
Big population, good workforce
Gilbert has more than good planning and nice restaurants. It benefits from the return of the Valley’s population growth, but also stronger-than-average workforce demographics.
Its population has grown from 5,700 in 1980 to more than 237,100 in 2016, according to the U.S. Census Bureau. That population is highly educated, with more than 41 percent of Gilbert residents having earned college degrees versus 30 percent in Maricopa County and 27 percent statewide.
Established before World War I by Mormon settlers from Mexico leaving that country during one of its revolutions, Gilbert now is home to residents with a median household income of more than $82,000, compared to $54,229 for the region.
Daniels said Gilbert is attractive to newcomers because of its low crime rate and good schools in a state often slighted for low teacher pay and classroom spending.
Eric Wichterman, executive managing director of commercial real estate firm Cushman & Wakefield, said Gilbert’s demographics put it in elite company.
“You have the demographics that are very similar to Scottsdale,” he said.
A cheaper alternative
Gilbert has Scottsdale’s population demographics, but it doesn’t have the costs of Scottsdale or even downtown Tempe or Phoenix. Bryan Taute, a senior vice president with commercial real estate CBRE Group Inc., said Gilbert has average office rents cheaper than the $30 per square foot found in downtown Phoenix and central Scottsdale and the $40 per square foot space is going for in downtown Tempe.
The town’s popularity, however, is driving up prices. Holmes said she sees commercial rents hitting Valley highs in downtown Gilbert as more businesses want to be close to popular restaurants. That helps local businesses, she said, but it could price out existing ones.
“We don’t want to lose our small-town feel,” Holmes said.
As with any real estate development spurt in Arizona, communities run the risk of building too much too fast and ending up with empty space and failed projects when real estate and business cycles turn downward. Vacancy rates still are north of 20 percent in parts of Chandler and Phoenix.
Gilbert tries to avoid that by being “aggressively patient” and waiting for the right project at the right time, Daniels said. For example, Gilbert has been more subdued in approving new apartment developments and has developed design guidelines for its restaurant row.
Looking to expand
To grow beyond its sleepy, bedroom- community image, Gilbert wants to bring in more office space, retail and potentially hotel and multifamily residential to its downtown core on Gilbert Road.
LGE Design Build — which developed Heritage Marketplace in downtown Gilbert — has plans for a 40,000-square-foot mixed-use building with ground-floor retail and office space at Gilbert Road and Vaughn Avenue, said comp-any president David Sellers.
Gilbert also is plotting an extension of Ash Street in its downtown area, a move that could allow for additional projects.
Mark Singerman, vice president and regional director for the Rockefeller Group, said Gilbert benefits from tenants and employers not being able to find space along Chandler’s Price Corridor. That area is popular with technology, creative and professional tenants and has single-digit vacancy rates.
Gilbert still has to overcome its location, which some tenants and brokers view as farther out from the region and even the East Valley’s core.
The town itself also is capable of spurring development, such as with a request for proposals to develop a 9-acre lot just north of its restaurant row, said Dan Henderson, Gilbert’s economic development director.
The town’s effort to buy downtown properties initially was aimed at reducing blight, but owning land has allowed it to chart a course for its downtown and focus on local restaurants, Daniels said
Companies taking risks
The restaurant transformation of Gilbert’s main drag didn’t happen overnight. The Gilbert mayor pointed to cutting-edge developer and businessman Joe Johnston transforming Liberty Market into a destination and Upward Project’s Postino’s and Joyride Tacos concepts that took a chance on Gilbert.
“He told people that was the best business decision he ever made,” Daniels said of Upward Projects’ co-owner Chris DeMarco.
Johnston has the unique Agritopia development at Ray Road and Loop 202 and is developing another urban, $75 million project called Epicenter on the same former farmland. Johnston calls it “suburban urbanization.”
Taute and Wichterman said the downtown Gilbert market is geared toward small creative, professional and technology tenants looking for cool spaces that appeal to workers.
“You don’t see anything like that until you get to Mill Avenue,” said Wichterman, who is an investor and part owner of Heritage Marketplace.
While Gilbert lacks major employers such as Intel Corp. in neighboring Chandler, Orbital ATK has 400 employees in Gilbert and is growing that footprint.
“Gilbert presents a good growth market due to the large supply of technical experience and relatively low cost of living,” said Vicki Cox, Orbital’s communications director. “It is easy to attract and retain the talent necessary to meet this increasing demand.”
In September, Scottsdale-based web domain company GoDaddy announced a $15 million investment in its Gilbert operations where it has 1,500 workers. The town is giving GoDaddy an $800,000 incentive for the expansion.
Calvin Crowder, GoDaddy’s vice president of global real estate, cited Gilbert’s “sense of community” and workforce pools in his company’s presence there.
Changing its image
Gilbert has an ample amount of workers, and it can offer shorter commutes, but the challenge is selling those workers — including millennials — and employers on a suburban location at a time when downtowns are desired, Gustin said.
“You have to sell the labor,” Taute said.
Yet Gilbert added 15,000 jobs in recent years and has seen 9 million square feet of new and renovated development, Henderson said.
The town has new office and other developments landing in its San Tan Mall area and larger projects on Loop 202 such as the 250-acre Rivulon development and Parc Lucero, a development that landed the U.S. headquarters and 225 jobs from Silent-Aire, a Canadian HVAC manufacturing company.
Yet Gilbert added 15,000 jobs in recent years and has seen 9 million square feet of new and renovated development. Forty-two percent of that space are tenant improvements, which shows companies are expanding there, Henderson said.
The town has new office and other developments landing in its San Tan Mall area and larger projects on Loop 202 such as the 250-acre Rivulon development and Parc Lucero, an industrial development that landed the U.S. headquarters and 225 jobs from Silent-Aire, a Canadian HVAC manufacturing